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Fiscal fears loom as Modi government misses FY19 tax revenue target by over Rs 1 lakh crore

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Direct tax collections clocked Rs 11.38 lakh crore, missing a higher revised target of Rs 12 lakh crore by Rs 62,000 crore.

Fiscal fears loom as Modi government misses FY19 tax revenue target by over Rs 1 lakh crore
The central government has missed its tax revenue estimates by more than Rs 1 lakh crore in FY19, potentially raising fiscal concerns for the new government after the ongoing Lok Sabha elections.
Direct tax collections clocked Rs 11.38 lakh crore, missing a higher revised target of Rs 12 lakh crore by Rs 62,000 crore. This is close to 0.3 percent of the gross domestic product (GDP).
The central GST, or CGST collections—which come under indirect taxes— are estimated to be around Rs 4.60 lakh crore against a lower revised estimate of Rs 5.03 lakh crore, a shortfall of roughly Rs 40,000 crore, or 0.2 percent of the GDP.
In excise collections, the Centre is expected to collect Rs 2.35 lakh crore against Rs 2.59 lakh crore target for FY19, a gap of around Rs 24,000 crore, slightly more than 0.1 percent of the GDP.
The combined revenue deficit comes in at Rs 1,26,000 crore.
However, for CGST collections the government is still trying to meet a scaled down revised estimate by dipping into the GST Compensation Fund, sources told CNBC-TV18.
At the end of FY19, the Centre’s GST Compensation Fund showed an unspent amount of Rs 40,000 crore, which the Centre may use to bridge the CGST gap, sources said.
Using the Rs 40,000 crore unspent amount temporarily from the compensation fund will help the government show it has met its CGST target.
The February 1 budget cut the CGST target for FY19 by a massive Rs 1 lakh crore from Rs 6.03 lakh crore of budget estimates to Rs 5.03 lakh crore.
On customs, the government has met its FY19 target of Rs 1.31 lakh crore.
Putting the mentioned tax shortfalls together would have pushed the fiscal deficit to almost 4 percent of the GDP in FY19, had it not been for expenditure rollovers, expenditure savings and using funds from public accounts to temporarily meet the cash shortage.
Sources told CNBC-TV18, fiscal deficit for FY19 clocked 3.44 percent, just a tad lower than the 3.45 percent mark, which would have otherwise pushed the deficit number to 3.5 percent. In that case, the government would have missed meeting even the revised estimate, which was raised from 3.3 percent to 3.4 percent in the February 1 budget.
A large section of government officials are now of the view that some of the key revenue targets for FY20 will have to be revised in the July budget, given the trend in the previous fiscal.
For instance, one number that is being widely talked about is the direct tax target of Rs 13.80 lakh crore for FY20. Against a budget estimate of Rs 11.50 lakh crore, and a revised estimate of Rs 11.38 lakh crore, the Rs 13.80 lakh crore target for FY20 is clearly a tall order.
In comparison, close to Rs 28 lakh crore expenditure budget for FY20 would hardly see any downward revision, as a new government would not like to cut corners on expenditure. For example, it’s pertinent to note the present government has announced expanding the scope of the PM-KISAN to all farmers on return to power.
PM-KISAN is 100 percent funded by the Centre with a Rs 75,000 crore allocation in the FY20 budget.
Growth rates of nominal GDP in FY20 will also play a critical role.
The detailed govt accounts for FY19 will be released by the Controller and Auditor General or the CGA towards May end.